Netherlands on Edge of Economic Crisis; Unemployment Surges as Home Prices Collapse

Netherlands is underwater in more ways than one. Der Spiegel reports Underwater: The Netherlands Falls Prey to Economic Crisis

More than a decade ago, the Dutch central bank recognized the dangers of [the housing] euphoria, but its warnings went unheeded. Only last year did the new government, under conservative-liberal Prime Minister Mark Rutte, amend the generous tax loopholes, which gradually began to expire in January. But now it’s almost too late. No nation in the euro zone is as deeply in debt as the Netherlands, where banks have a total of about €650 billion in mortgage loans on their books.

Consumer debt amounts to about 250 percent of available income. By comparison, in 2011 even the Spaniards only reached a debt ratio of 125 percent.

The Netherlands is still one of the most competitive countries in the European Union, but now that the real estate bubble has burst, it threatens to take down the entire economy with it. Unemployment is on the rise, consumption is down and growth has come to a standstill.

Even €46 billion in austerity measures are apparently not enough to remain within the EU debt limit. Although [Dutch Finance Minister and Euro Group Chief] Jeroen Dijsselbloem has announced another €4.3 billion in cuts in public service and healthcare, they will only take effect in 2014.

“Sticking the knife in even more deeply” would be “very, very unreasonable,” Social Democrat Dijsselbloem told German daily Frankfurter Allgemeine Zeitung, in an attempt to justify the delay.

Dijsselbloem’s Hypocrisy

Note how Dijsselbloem is ready and willing to stick austerity measures of any kind on every other eurozone economy but his own.

Unemployment Surges as Home Prices Collapse

The Australia Macro Business blog picks up the story in Dutch unemployment surges as house prices fall.

Earlier this month, I posted on how the Netherlands was facing a potential economic crisis on the back a severe housing correction, whereby house prices fell by -8% in the year to December 2012 to be down -18% since prices peaked in 2008, pulling many Dutch households into negative equity (see next chart).

The release of labour force data overnight suggested the Netherlands’ economy has deteriorated further, with Dutch unemployment increasing to 8.1%, a level not seen since the 1980s, with job losses most accute in the building industry (see next chart).

The jump in unemployment follows the contraction in the Dutch economy, whereby GDP has contracted by -1.2% over the past year (see next chart).

The sharp deterioration in the Dutch economy is placing pressure on the central government to abandon austerity measures, which it has pursued for the best part of two years and is partly responsible for the contraction in demand.

Best is Yet to Come

As noted, the hypocrites want austerity for everyone but themselves. Regardless, the Netherlands economy is headed for a much sharper contraction as is France.

Simply put, the entire eurozone is in deep trouble even as the nannycrats insist the worst is behind. Ironically, the best is indeed ahead, and the best is a breakup of the eurozone.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

Netherlands on Edge of Economic Crisis; Unemployment Surges as Home Prices Collapse

Euro Surges On Optimism Cyprus To Be "Fixed" In Hours

EURUSD (and implicitly the algo-connected S&P 500 futures market) is surging on the basis of optimism (for the new ‘deposit tax plan’) from the head of the party that abstained from the previous ‘deposit haircut vote’.

• *CYPRUS’S NEOFYTOU SAYS SITUATION IS DIFFICULT


• *CYPRUS’S NEOFYTOU EXPRESSES CAUTIOUS OPTIMISM

It seems ‘cautious optimism’ is contagious but the irony of this politician’s two-faced hypocrisy driving any market reaction is mind-numbing. EUR has broken above 1.30, Italian and Spanish bonds are rallying, and Italian stocks are now green for the week.

 

President Nicos Anastasiades’ ruling DISI party has said a solution satisfactory to the troika may be possible within hours. Speaking to reporters, deputy leader Averof Neophytou said: There is cautious optimism that in the next few hours we may be able to reach an agreed platform so parliament can approve these specific measures which will be consistent with the approach, the framework and the targets agreed at the last Eurogroup.

 

 

 

Charts: Bloomberg

Zero Hedge

Euro Surges On Optimism Cyprus To Be "Fixed" In Hours

Japan To Hike Utility Prices By 14-19% As Inflation Surges In All The Wrong Places

First it was gas prices, then it was food prices, and now it is the turn of basic utilities to see costs surge by double digits. Dow Jones reports that “Japanese utilities, forced to idle their nuclear power plants over the past two years and facing higher fuel costs due to a weak yen, are now looking to push through double-digit rate hikes for their commercial customers.” This means less disposable income, less corporate profits, less monetary velocity, less growth and ultimately less “inflation” in other things such as the much desired stock market, which was supposed to be the wealth effect offset to all staples price increases. At least on paper. Of course we explained on various occasions, most recently here, why in Japan a US-style of wealth effect price substitution would never work. Surely nobody could possibly see this coming – “The action comes at a bad time for some Japanese companies that were hoping the fall in the yen and much-trumpeted efforts by the government to turn round the economy would help improve their prospects.” Ah hope - the only strategy left.

More on the mainstream press catching up with what we said over two months ago:

While the government has raised some concerns about the raising of power rates, the move seems inevitable given the prior deregulation of electricity prices.

 

Eight of the nation’s nine utilities with nuclear power plants have been posting losses due to the higher cost of buying imported fossil fuels in the wake of the Fukushima nuclear disaster and the subsequent shutting down of reactors amid safety concerns.

And the biggest catalyst for what is set to be a major inflationary spike, but not in discretionary prices, but in staples – the same one every other time: cash runs out.

The utilities managed to keep prices at low levels over the past two years despite the higher fuels costs by drawing on cash reserves. But some of them are now running low on reserves, and see price hikes as the only way to avoid possible bankruptcy.

 

On paper, the government has no power to intervene in pricing issues between corporate customers and utilities because of the liberalization of these markets. But that price deregulation left the utilities in full control of the power grid, ultimately stymieing attempts by outside firms to grab a larger share of the market.

Would a wholesale bankruptcy of the entire Japanese energy sector be really that bad? It would simply mean the wholesale nationalization of the industry, from where Japan could simply proceed to subsidize everything. Naturally this would simply be the first step to global trade warfare as neighboring countries saw this as plain old subsidies, which they would be. But Japan will cross that bridge when it gets to it.

In the meantime, the Japanese consumers who are so happy with Abe are about to be much, much poorer:

Japan paid Y24 trillion ($ 248 billion) for imported fossil fuels including crude oil, natural gas and coal in 2012, up 10% on year, compared with Y21.8 trillion in 2011, itself a 25% increase, according to the Ministry of Finance.

 

Most of Japan’s corporate customers have no choice but to accept the proposed rate hikes, because of the virtual monopoly enjoyed by regional utilities despite a nominal liberalization of the sector in the mid-1990s.

 

Tokyo Electric Power Co. , the owner and operator of the stricken Fukushima Daiichi nuclear power plant, announced in early 2012 an average 15% rate hike, as its bill for fossil fuels swelled to Y3.26 trillion, a rise of 50% from pre-Fukushima levels. Later in November, it said that compensation for damage caused by the nuclear accident in March 2011 and the cost of decontamination work around the Fukushima area may each top Y5 trillion.

 

Four other major utilities, Kansai Electric Power Co. , Kyushu Electric Power Co. and Shikoku Electric Power Co. in western Japan and Tohoku Electric Power Co. in northern Japan, have all announced plans to raise rates for corporate customers by 14% to 19%.

To the government this is merely an unintended consequence which they never could have foreseen. Sadly, everyone else could.

The government has belatedly acknowledged the importance of having a neutral grid operation not tied to the interests of the utilities and in February formulated a plan to split these nine power utilities into grid operators, power generators and power retailers. Under the plan, the separation of grid operation will take place as early as 2018.

The only hope for Japan, absent some magical arrangement whereby the US can export billions in BTUs of LNG well below cost to Japan, something Abe is desperately praying for, is the restart its nuclear power plant.

Japan’s electricity prices will likely rise by 10-20% this year, unless at least a few of the 48 currently idled reactors resume operations, said Atsushi Suzuki, a senior consultant who monitors the energy industry at Mitsubishi Research Institute. The impact of electricity rate hikes on the economy is difficult to calculate because it varies among industries, Mr. Suzuki said.

 

“In the long term, we may give up nuclear power, but for now, there’s no alternative but to restart safe reactors,” said Yoshimitsu Kobayashi, president of Mitsubishi Chemical Holdings Corp. (4188.TO), a major electricity user.

 

Putting currently idled plants back on line offers an inexpensive way to generate power in the short-term since a large part of their costs have already been amortized, said Takumi Fujinami, senior researcher at the Japan Research Institute.

 

But given the difficult political environment over such restarts, he says that power conservation is a more realistic course of action in the long run.

In the aftermath of Fukushima we wish Abe the best of luck with this approach: it is far more likely he premiership will be cut well short on soaring energy, food and gas prices, before the locals are willing to go through another Fukushima.

Which then begs the real question: how long until Abe’s government mandate is cut short by populist anger due to out of control inflation in staples and unrest?

We give him 4-6 months.

Zero Hedge

Japan To Hike Utility Prices By 14-19% As Inflation Surges In All The Wrong Places

Public transportation surges as Americans return to work

Two cars of the ‘people mover’ public rail are seen covered with a advertisement for the 2014 Chevy Silverado pickup truck as they move past General Motors World Headquarters in Detroit, Michigan January 11, 2013.

Credit: Reuters/Rebecca Cook

WASHINGTON | Mon Mar 11, 2013 12:03am EDT

WASHINGTON (Reuters) – The number of Americans commuting by public transportation rose to the second highest level on record last year, as more people returned to work, according to an annual survey released by the leading U.S. transit association on Monday.

The growth in ridership would have been even stronger, if Superstorm Sandy had not stranded people and shut down transit along the East Coast, where public transportation is most concentrated, American Public Transportation Association President Michael Melaniphy said.

Altogether, U.S. transit ridership rose 1.49 percent, with passengers taking 10.52 million trips on trains, buses and commuter rail in 2012.

The increase was universal across the different modes of transit.

There were 1.42 percent more trips on heavy rail such as subways, 4.47 percent more on light rail, and 0.52 percent more on commuter rail than in 2011. Meanwhile, bus ridership grew 1.2 percent. Some of the light rail rise came from cities expanding or creating lines.

In the final quarter of the year, though, transit use was lower than in the fourth quarter of 2011, a reflection of Superstorm Sandy hitting in the fall. In November, New York and New Jersey, the states struck most by the storm, lost at least 41,600 jobs.

Rising fuel prices and a dislike of traffic contributed to the largest transit ridership since 2008, which was the highest year on records dating back to 1957, Melaniphy said.

Nonetheless, he added, nearly 60 percent of all transit trips are taken by people going to work.

“You can’t get people back to work unless you can get them to work,” Melaniphy said.

While the U.S. unemployment rate is stuck above the 6.5 percent that most economists consider healthy, it has been dropping for more than a year. The rate ended 2012 at 7.8 percent, well below where it ended 2011, 8.5 percent, according to Labor Department statistics.

The association points to places such as Seattle, Washington, where transit rides rose 11.8 percent over the year as the metropolitan area added more than 30,000 jobs.

At least 15 transit systems experienced record ridership last year, according to APTA. While some were in cities with well-established public transportation, such as Boston, Massachusetts, others were in areas associated more with freeways and commuting by car – namely Riverside and San Bernardino, California.

The question hanging over the industry is whether transit can meet mounting demand. Traditionally, fares only represent part of the agencies’ capital and operating budgets, with federal, state and local governments providing a hefty share.

Melaniphy points to voter initiatives to raise taxes for transit that passed last year – 49 out of 62 measures placed on ballots. The association has not seen such a high passage rate for transit funding initiatives since 2000.

Places where Sandy damaged the infrastructure are borrowing to bring transit back on-line. New York’s Metropolitan Transportation Authority, which carried 11 million bus and train passengers each day, has approved selling up to $ 2.5 billion of short-term bond anticipation notes for Sandy costs.

At the same time, the U.S. Congress in 2012 passed a long-awaited authorization for funding surface transportation. It includes loan, financing and grant programs that systems will be able to use for repairs or new equipment. The account, supplied by gas tax revenues used to fund federal transportation, was put off-limits from the $ 85 billion in spending cuts known as “sequestration.”

(Reporting by Lisa Lambert; editing by Jackie Frank)

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Reuters: Economic News

Public transportation surges as Americans return to work

Dow surges to new closing high on economy, Fed"s help

1 of 3. Traders work on the floor of the New York Stock Exchange March 5, 2013. The Dow surged to a new record on Tuesday, breaking through levels last seen in 2007 as investors extended 2013′s rally.

Credit: Reuters/Brendan McDermid (UNITED STATES – Tags: BUSINESS)

By Ryan Vlastelica

NEW YORK | Tue Mar 5, 2013 10:25pm EST

NEW YORK (Reuters) – The Dow Jones industrial average soared to a record closing high on Tuesday, breaking through levels last seen in 2007 and as investors rushed in to join the party in anticipation of more gains.

Signs of a strengthening economy, continued support from the Federal Reserve, and fairly attractive valuations compared to other assets have boosted the Dow by almost 9 percent so far this year. A strong reading in the services sector, which accounts for the bulk of economic activity, was the latest indicator of improving demand.

“I’m surprised at the speed of the gains, which have come at a pace that we can’t annualize. But stocks are still not expensive, and we can expect to continue getting a reasonable advance from here,” said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Global Investments, who helps oversee $ 760 billion in assets.

Gains came across the board, with 10 of the Dow’s 30 component stocks reaching new 52-week highs on a day when 456 securities hit new yearly highs on the New York Stock Exchange. The Dow Jones Transportation Average also closed at a new high after rising 1.5 percent.

About 71 percent of the NYSE stocks closed higher while 67 percent of Nasdaq-listed shares ended in positive territory. About 6.41 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, slightly below the daily average so far this year of about 6.48 billion shares.

About 16.9 million contracts changed hands in the U.S. options market on Tuesday, according to options analytics firm Trade Alert. The turnover consisted of 8.90 million calls and 8.01 million puts. The overall option turnover was in line with last month’s daily average of 16.89 million contracts.

The blue-chip Dow’s forward 12-month price-to-earnings ratio was at 15.87, compared with 16.99 during the 2007 highs, according to Thomson Reuters Datastream. The S&P 500′s price-to-earnings ratio was at 13.5.

Outside the Dow, Google continued its gains with the stock rising 2.1 percent to close at $ 838.60, an all-time high for the Web giant. Google is the highest-priced stock in the S&P 500.

The Institute for Supply Management’s services index showed growth accelerated in February to its fastest pace in a year. Still, some areas of the economy haven’t recovered as well as equity prices have since the financial crisis. The unemployment rate is at an elevated 7.9 percent, far above the 4.7 percent rate at the time of the Dow’s previous high.

Markets have shrugged off the stalemate between the congressional Republicans and the White House over automatic U.S. government spending cuts, known as the “sequester.” Other recent headwinds, including political turmoil in Europe, have also been navigated without much pain, with investors using any decline as an opportunity to buy.

“The economy is still expanding and improving despite the risk of higher taxes and lower spending,” McDonald said. “While you can never rule out a correction, we don’t see the economy or the Fed getting in the way of the market.”

Among Dow stocks hitting all-time highs on Tuesday were Walt Disney Co and 3M Co. All 10 of the S&P 500′s industrial sector indexes rose, with tech shares among the day’s gainers. Just two components ended lower – Coca-Cola and Merck & Co, while Alcoa Inc ended flat.

The Dow Jones industrial average shot up 125.95 points, or 0.89 percent, to close at 14,253.77. The Standard & Poor’s 500 Index gained 14.59 points, or 0.96 percent, to 1,539.79. The Nasdaq Composite Index climbed 42.10 points, or 1.32 percent, to 3,224.13.

Qualcomm Inc rose 2 percent to $ 67.97 after the world’s leading supplier of chips for cellphones said it was raising its quarterly cash dividend by 40 percent. BMC Software rose 3.7 percent to $ 42.32 and Micron Tech added 3.9 percent to $ 8.73.

CAUTIOUS OPTIMISM

Shortly after the opening bell, the Dow rose above 14,198.10, the intraday all-time high reached in October 2007, when the world was heading toward the financial crisis. The Dow’s previous closing high was set on October 9, 2007, when it ended at 14,164.53.

On Tuesday, the Dow set an intraday all-time high at 14,286.37.

The broad benchmark S&P 500 is at a five-year high and about 2.3 percent away from its all-time intraday high of 1,576.09.

Equity investors have been welcoming signs of improvement in the U.S. economy, but a big part of the rally that has continued in 2013 without a significant correction is the result of the U.S. Federal Reserve’s easy monetary policy and the near zero short-term interest rates since December 2008.

As the market is aware that the cheap money from the Fed would have to eventually end, more investors were growing cautious. While the CBOE Volatility Index, or the VIX, fell 3.8 percent on Tuesday, it is still above lows reached in February.

“It’s clear the economy isn’t ready to have the Fed leave,” said Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York. “No one thinks we’re going into a crisis like we did after 2007, but the sense of play is very telling. Even though people are in the market, they’re very cautious and searching for yield.

“The caution is frustrated caution.”

(Additional reporting by Doris Frankel; Editing by Jan Paschal)

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Reuters: Business News

Dow surges to new closing high on economy, Fed"s help

Dow Jones industrial average surges to record

NEW YORK (AP) — The Dow has never been higher.
Business Headlines

Dow Jones industrial average surges to record

Beppe Grillo Surges in Last Minute Rush; Is That a Good Thing?

Reader “AC” who is from Italy but now lives in France informs me that the Italian elections this weekend are getting even more interesting.

Specifically, “AC” writes “Grillo claims 800,000 assisted at his closure meeting in Rome with another 150,000 via streaming. My feeling is that there will be a huge turnout for Grillo in the election“.

Joe Weisenthal on the Business Insider writes “I Have Seen The Scariest Chart In Europe“.

The chart Weisenthal refers to is from Google Trends. It shows a surge in searches on Beppe Grillo. Weisenthal says …

Grillo is a comedian-turned-politician who is doing shockingly well the Italian elections (coming up this Sunday and Monday) by running on an aggressive anti-bank, euro-skeptic platform.

He’s capitalizing on the deep frustration that exists in Italy due to the weak economy, and the perception that the current government is too corrupt and cozy with banks. Were he to gain a sizable block in the upcoming parliament, he represents a pretty serious threat.

A threat? A Threat to What?

Grillo wants Italy to vote on whether or not to stay in the Eurozone. On that score I happen to agree. The sooner the eurozone splinters the better. Greece would be better off it it left four years ago and Spain would be better off if it left now.

That does not mean I endorse all the policies of Grillo, and indeed I don’t. My point is that huge change is desperately needed.

As I have stated on many occasions “Eventually, there will come a time when a populist office-seeker will stand before the voters, hold up a copy of the EU treaty and (correctly) declare all the “bail out” debt foisted on their country to be null and void. That person will be elected.”

The scare should not be that a breakup happens, but rather that the inevitable is delayed with grave consequences.

Scariest Chart Ever?

Weisenthal calls that the scariest Europe chart ever. Assuming the chart does represent an increasing interest in Beppe Grillo, I call it a necessary trend on the path to rebalancing Europe.

For more on the election in Italy, an explanation of Beppe Grillo’s “5 Star Movement” and some election predictions, please see European Reader Offers Insights on Upcoming Italian Election

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

Beppe Grillo Surges in Last Minute Rush; Is That a Good Thing?